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Profits Not Box Office Matter to Studios

|Includes:DIS, LGF, News Corporation (NWSA), TWX, VIA

The box office boom is clearly a plus for theater owners how collect about 45% of ticket revenues and get more high margin concession sales.  For studios, the boom is not clear cut.  It depends on which studios and are producing the hits and most importantly, the profitability of individual films and the overall annual slate.

UBS analyst Mike Morris, a buddy of mine, noted in a report this week that the 1Q box office gain of 9.5% was generated by 109 films vs. 158 in 1Q08.  Clearly, studios are trying to cut slates, save money on production and marketing, and cut overhead.  I think the new approach offers modest potnetial to improve profit margins and constency but it is mostly a reflection of the new reality of lower DVD sales and uncertainty over future digital revenue streams.

NWSA and DIS have been best historically.  TWX has been mediocre but seems to have learned some tricks in the last 18 months.  VIA lags.  LGF is a pure studio but has had issues with controllng costs as its slate has grown and bigger budget films have been added.

Stocks: NWSA, TWX, DIS, VIA, LGF